After the Ukraine invasion, thorough research by the University of Notre Dame discovered that companies abstaining from Russia saw a heightened consumer sentiment — particularly with a strong environmental, social, and governance (ESG) reputation.
Stakeholder Capitalism — The End of Shareholder Primacy?
This is a textbook case of stakeholder capitalism, under which corporations take the interests of other stakeholders, such as their employees and customers and communities and larger planet, in addition to their shareholders into account.
Criticisms of the stakeholder theory contend that companies should purely pursue profits with their shareholder as the main followers. But this new study from Notre Dame shows that if a company takes a socially responsible stance, it can bode well with consumers—especially for companies with established ESG reputations.
The study looked at corporate decisions to exit from Russia and measured if those drives had an influence on three paramount aspects of consumer mindset: net brand buzz, brand consideration set, and purchase intent. The results also showed that in the eight weeks after news was released about brands retreating from Russia, there was a substantial uplift in net brand buzz – signaling an increase in positive consumer perception of these brands against their direct competitors.
The Role of Timing and Context
Notably, firms that delayed their withdrawal until the industry peer line increased net buzz. Therefore, although early action is appreciated, it may also be a good idea to wait in these sorts of situations as the geopolitical environment is more complex.
Consumer responses to companies operating in a business-to-business (B2B) or business-to-consumer (B2C) context differ, the study also found. Establishing sensitivities around how specific markets might interpret their behaviours during times of global political uncertainty, which has the potential to inform a business.
The researchers point out: Companies in politically sensitive regions should consider the multiplicity of interests among relevant actors, invest ESG as reputational insurance, time major decisions carefully, monitor consumer metrics consistently and adjust their strategies according to industry context.
Conclusion
The results of our work deepen the understanding of the relationship between corporate actions and consumer mindset metrics in a geographically new geopolitical context, as well as providing insights for managerial decision-making and public policy. With clear insight into the intricate web of corporate choices and governmental interventions and market demands, firms will be better equipped to traverse this challenging terrain ethically and strategically.
